First Natural: Special Deal for a thief

Can someone who has stolen from and destroyed a company still be a creditor? The thief is still sitting on the stolen subsidiaries in the mainland while the SFC .....twiddles their thumbs.

"Based on books and records available to the Directors and the Provisional Liquidators, Mr. Yeung is a potential creditor under the Scheme. As at the date of this announcement, Mr. Yeung has not filed any claim to the Provisional Liquidators. As under the Scheme, subject to adjudication and adjustment, it

is estimated that approximately 2,500,000 Creditors Shares with the amount of approximately HK$9.7 million as the Cash Settlement together with apportioned part of the realisation of the assets of the Excluded Companies, if any, will be issued and paid by the Company to Mr. Yeung, who is interested in approximately 35.13% of the issued share capital of the Company before the Capital Restructuring, to settle the indebtedness of approximately HK$68 million owed to him. The settlement with Mr. Yeung under the Scheme will constitute a special deal under Note 5 to Rule 25 of the Takeovers Code"

Wanted: First Natural Fujian Fujitives (1076.HK)

Thieves wanted by the SFC - Dead or alive, preferably the former....

The SFC is trying to contact these people who it believes have information relevant to a current enquiry. If you know where they are or have information concerning them, please contact the SFC at (852) 2231 1000 or write toleadsplease@sfc.hk.
	Name: Yeung Chung Lung (楊宗龍) Nationality: Chinese Sex: Male Date of birth/ age: 7 September 1952 Place of Birth: China	Descriptive Information: He was the Chairman and Executive Director of First Natural Foods Holdings Ltd (HK listed stock code 1076, now in provisional liquidation) until his office was vacated on 27 August 2009. The 2007 annual report of First Natural Foods Holdings Ltd shows that he was a member of the Fujian Province Fuqing City Committee of Chinese People’s Political Consultative Conference (政治協商會議福清市委員會) and the Vice-president of the Fujian Province City General Chamber of Commerce (福建省福州市工商聯合會). He is the father and father-in-law of Yang Le and Ni Chao Peng respectively. Yeung is believed to be in Mainland China.
	Name: Yang Le (楊樂) Nationality: Chinese Sex: Male Date of birth/ age: Around 35 years old	Descriptive Information: He was the Chief Executive Officer and Executive Director of First Natural Foods Holdings Ltd (HK listed stock code 1076, now in provisional liquidation) from May 2001 to December 2008. He is the son of Yeung Chung Lung. Yang is believed to be in Mainland China.
	Name: Ni Chao Peng (倪朝鵬) Nationality: Chinese Sex: Male Date of birth/ age: Around 37 years old	Descriptive Information: He was the Executive Director of First Natural Foods Holdings Ltd (HK listed stock code 1076, now in provisional liquidation) from May 2001 to December 2008. He is the son-in-law of Yeung Chung Lung. Ni is believed to be in Mainland China.

First Natural 1076.hk: the fraud continues

Liquidators still cannot recover property from the former thieving directors. There has been fraud committed, the courts in some regions recognize that fraud has been committed, however there is no property rights and property in plain sight cannot be recovered. The liquidators cannot even get a hearing in Ningbo. What is the bunch of useless cocksuckers in the SFC/HKex doing?

"Since the appointment on 6 January 2009, Mr. Stephen Liu Yiu Keung and Mr. David Yen Ching Wai, the

Provisional Liquidators, have been investigating into the affairs of the Group and have taken all necessary
actions to preserve the assets and to assess the situation of the subsidiaries of the Company in the People’s
Republic of China (the “PRC”). However, without the assistance of the former Directors, Mr. Yeung and Mr.
Yang, who were the legal representatives of the subsidiaries in the PRC, the Provisional Liquidators would
not be able to proceed the same. As such, legal actions have been taken against Mr. Yeung and Mr. Yang in
respective regions in the PRC for the possible damages to the Group resulting from their illegal possessions
of the properties of the subsidiaries in the PRC, including but not limited to, the company chops and statutory
certificates of the subsidiaries in the PRC. The status of the court cases as at the date of this report is as follows:
(i) Fuqing Longyu Food Development Co., Limited (“Fuqing Longyu”)
The Provisional Liquidators were informed by the PRC legal adviser, based on his recent visit to the
Administration of Industry and Commerce in Fuqing (福清市工商行政管理局) (the “Fuqing AIC”) in May
2010 and to the Foreign Trade and Economic Cooperation Bureau in Fuqing (福清市對外貿易經濟合作
局) (“Fuqing FTECB”) in July 2010, that the changes of the board and the legal representative of Fuqing
Longyu have not been effected despite the enforcement notices having been issued to both authorities
by the Fuzhou Intermediate People’s Court (福州市中級人民法院) of Fujian Province, the PRC.
As such, the Provisional Liquidators have written to the Fujian Provincial Department of Foreign Trade
and Economic Cooperation (the “Fujian FTECB”) (福建省對外貿易經濟合作廳), the Hong Kong Economic
and Trade Office in Guangdong of the Government of the Hong Kong Special Administrative Region (the
“HKETO”) (香港特別行政區政府駐粵經濟貿易辦事處) and the Ministry of Commerce of the PRC (中華人
民共和國商務部) informing the difficulties encountered and seeking their assistance in replacing the board
and the legal representative of Fuqing Longyu and are awaiting their replies.
The Provisional Liquidators were informed by the Fujian Branch of Bank of China (“BOC Fujian”)(中國
銀行－福建省分行) in the PRC that the BOC Fujian had obtained a judgment against Fuqing Longyu in
relation to a loan granted to Fuqing Longyu and is taking steps to dispose of certain collaterals to repay
the loan. Since the replacement of the board and the legal representative of Fuqing Longyu has not been
effected by Fuqing AIC, the BOC Fujian has not provided the Provisional Liquidators with the details of the
abovementioned legal action.
(ii) Jia Jing Commercial (Shanghai) Co., Limited (“Jia Jing (Shanghai)”)
After consulting the PRC legal advisers, the Provisional Liquidators are taking appropriate steps to apply
for re-issuance of company chops and statutory certificates of Jia Jing (Shanghai).
(iii) Ningbo Dingwei Food Development Co., Limited (“Ningbo Dingwei”)
First China Technology Limited, a subsidiary of the Company and the immediate holding company of
Ningbo Dingwei, attempted to file a statement of claim with the Ningbo Intermediate People’s Court
of Zhejiang Province (the “Ningbo Court”) (浙江省寧波市中級人民法院) but the filing was denied by the
Ningbo Court. The Provisional Liquidators have been collating further evidence and are taking appropriate
steps to prepare a revised statement of claim to be filed with the Ningbo Court.

China Fraud Ltd.

First Natural Holdings (1076.HK) unfortunately is not the only Chinese company used to scam billions from the public.

The Nigerian 419 frauds cannot even compare to what is currently being perpetuated by Chinese companies listed in HK and Singapore. These publicly listed Chinese companies are run by their managers like personal fiefdoms with NO regulatory overview at best, at worst they are abetted by corrupt officials.

What does the HKex or SFC do about it?... NOTHING. The HKex in conflicting positions of both regulating and profiting off the market is all eager to accept IPOs while all too cavalier when policing the listed companies. The HKex faced with this conflict of interest clearly resolves it by forgoing any regulatory responsibility and just concentrates on profits.

The Singaporeans are now being stung by these scams. Chinese consumers can be thrown in jail for not paying credit card debts, but chinese company directors can openly steal billions and resort to gangster tactics with no consequences...

Fujian based companies seem to feature high in these shenanigans.

SCMP today:

Since late 2007, a spate of so-called S-chips - mainland companies listed on the Singapore exchange - have borrowed money then failed to repay the debts, with some becoming mired in fraud scandals.

Of the 11 S-chips that issued convertible bonds between 2005 and 2008, six have declared themselves unable to repay.

In June 2008, blue-chip investment bank Morgan Stanley sold US$109 million worth of convertible bonds issued by waste recovery group Sino Environment Technologies, based in Fujian , to a group of lenders including US investment firm Stark Investments.

Sino-Environment's share price has since crashed from S$1.30 (HK$7.18) on the day it sold the convertible bonds to S$0.135 when the stock was suspended from trading in September.

During that period, Sino not only defaulted on its bonds - the Singapore-listed firm is also being investigated by the city state's Monetary Authority, a person involved in the case confirmed, after its auditors Pricewaterhouse Coopers said they could not verify the whereabouts of US$85 million of Sino-Environment's cash.

The Monetary Authority declined to comment.

China Printing & Dyeing, a textiles company, is one of the group of S-chips that could not repay bank loans.

It has fallen under what the Singaporeans call "judicial management", the city state's version of bankruptcy protection.

China Printing & Dyeing's shares were suspended from trading in October 2008 when its chief executive Tao Shoulong and deputy chief executive Yan Qi, a husband and wife team, disappeared. The duo fled after a subsidiary announced it was unable to honour 2 billion yuan (HK$2.27 billion) worth of debts. The pair were subsequently arrested in Guangdong, according to numerous reports in Singapore. The company was delisted from the Singapore exchange last week, leaving its shareholders with nothing.

Then there was Yangtze River Delta aluminium company Ferro-China, which buckled under the weight of almost US$1 billion of debts in 2008 before entering mainland bankruptcy proceedings.

The most recent S-chip bond default came from China Milk Products Group, based in Heilongjiang, that produces bull semen and cow embryos for cattle breeders,

The vast majority of the investors who bought US$150 million worth of convertible bonds China Milk sold through Deutsche Bank in December 2006 have exercised an option to get their money back, a person close to the agricultural company confirmed.

China Milk's net profit tumbled 73 per cent in the three months to last June compared to a year previously. The business was hit by last year's tainted milk scandal on the mainland, which cut demand among dairy farmers for new livestock.

On January 5, China Milk told its bond holders it would not be able to meet a repayment deadline. The company said it had the cash but was awaiting approval from the State Administration of Foreign Exchange, the mainland regulator that controls the flow of funds to and from abroad, to get it out of China. A person with knowledge of the firm said China Milk was confident of repaying its bond holders as soon as possible.

Then there is the case of Sino-Environment, which according to a person close to the company, could take many months to resolve.

The entire executive board, including chairman Sun Jiangrong, resigned on January 2 and a bitter spat has broken out between Sino-Environment's independent directors, led by new chairman Charlie In Nany Sing, who were appointed by investors to sort out the mess, and its mainland staff.

In December, a workers union at one of the firm's subsidiaries, Thumb Env-Tech Group (Fujian) announced its "few hundred" workers would resign en masse because the parent company's independent directors were "attacking" the executive directors and the company.

After PriceWaterhouse Coopers issued its report, the independent directors obtained an injunction from the Singapore Supreme Court to ban Sino-Environment's executive directors from selling the company's assets or signing contracts.

In May, a Sino-Environment subsidiary said it paid 920 million yen (HK$79.53 million) to a Japanese firm for chemicals, but the alleged recipient told the auditors it never received the cash.

When PwC visited Sino-Environment's bank, Xiamen International Bank, in Quanzhou , to try to investigate, the bank's branch manager forced the accountants off the premises and shuttered the building.

Another subsidiary, Fuda Desai Environmental Protection, allegedly invested 230 million yuan in four waste power projects, but PwC could not find any evidence that the payments were approved by the board, or even made.

Again, the auditors attempted to verify documents relating to the deals at the branch of Bank of Communications (SEHK: 3328) through which Sino-Environment had made the supposed payments.

They were met by a personal relationship banker who would not let them talk to anyone else or check the branch's IT systems to see if the payment documents were real.

The Sino-Environment executive directors, who have since resigned, accompanied PwC on both bank visits.

A third subsidiary, Fujian Weidong EPT Co, made two interest-free loans worth 50 million yuan to "two parties that did not appear related to the company," the PwC report continued. The accounting firm said it "did not come across any documentation evidencing that the company's board had been informed of or approved these loans".

PwC complained that Sino-Environment's executive directors had "hampered the performance" of its work. The accounting firm said Sun Jiangrong, who declined to comment for this article, would not provide any documents supporting the supposed deals and payments.

A person involved in the discussions with the Sino-Environment's bond holders said there was no certainty the US$109 million would be returned to them. Morgan Stanley declined to comment on the case.

The SIAS' Gerald said Singapore could do nothing more than pass its concerns on to mainland authorities. And in China, the Sino-Environment case has already been closed. The Fuzhou Public Security Bureau said on January 1 it had found no evidence of embezzlement at Sino-Environment, according to an announcement on Sino-Environment's website. A spokesman for the Singapore Stock Exchange would not comment on the issue of S-Chips defaulting on their loans.

Of course, Hong Kong investors have suffered similar problems. Since late 2007, 11 mainland companies listed here have also failed to repay some or all of their debts, according to data.

A corporate debt salesman at an international bank, who asked not to be named, does not blame these mainland insolvencies entirely on the companies themselves. "There was so much demand in the boom years from hedge funds and banks for debt linked to Chinese companies," he said. Maybe everyone was a bit too dazzled by geography."

Beware.

First Natural 1076 - raped naturally: Chinese style

As show by the latest filing, we have a Fujian/China company listed in HK asset raped by management. The sad state of affairs started when the chairman (Yeung Chung Lung), son (Yang Le) and son-in-law(Ni Chao Peng) resigned from the board. The chairman and his son then subsequently disappeared.

Now First Natural, a public HK company cannot assert any ownership rights over it's subsidiaries in China, resulting in a loss of RMB$1.5B and all assets. The provisional liquidators in some cases cannot even get a hearing in a Chinese court:

(iii) Ningbo Dingwei

The Company has attempted to file a statement of claim with the Ningbo Intermediate People’s

Court of Zhejian Province ( ) but the filing was denied by the court.

The company had a over RMB$800m in cash and this has disappeared. Cash as seen on the balance sheets of Chinese companies is NO margin of safety for investors.

The family of thieving bastards:

Sinotronics 1195 shenanigans webs Webb

Another one of the notorious Fujian based companies (amongst others like First Natural, Chaoda,...) with opaque corporate governance.

Sinotronics is an electronics manufacturing company with has a NAV of over HKD$1/share, cash of ~$1.17/share, total debt of 0.81/share. At the time of writing Sinotronics had a market cap of $154m.

In summary:

The trouble started in Feb/April 2007 when they entered into two interest swap agreements with Douche bank with notational values of $390m and USD$100m. This was a disastrous deal, which while they received upfront payments of HKD$39m and USD$10m from Douche bank, they had to settle semi-annually with some index contrived by the bank ("Douche bank Pan-Asian Forward Rate Bias Index"). The "bias" in the name didn't set off alarm bells.

The controlling shareholder, Lin Wang Qiang, to his credit (or regret) subsequently offered to indemnify Sinotronics against derivative losses on Dec 2007.

The famous crusader of corporate governance in HK, David Webb purchases 880k shares avg 0.88/share giving him a total of 34m shares (6.09%)

Sinotronics decided the terms of the interest swap agreements were onerous and stopped paying interest on Oct 2008 and Douche bank sued and Sinotronics counter sued saying a Douching bank employee allegedly misled them.

Webb sells 600k shares @0.38 (-56% loss) and is below the 5% reporting threshold and has 27.7m shares left. Together with his other vehicle Preferable Situation has 3.4m shares or 6.04%.

Sinotronics and Douche settled on Nov 2009 with Sinotronics agreement to pay "less than US$23.7m" the original demand, the exact amount is not revealed.

To access the funds to pay this (keep in mind they have HKD$648m in cash):

- Lin Wang Qiang under terms of his indemnity agreement was now on the hook for HK$29.2m and to pay this he decided to sell all his shares (230m shares).

- Sinotronics decides to do a open offer of 1 share for 2 at a price of 0.18cents/share.

Friday 20 Nov 2009, Union Day Group files a notice saying they have 169m or 30% of the company.

Tuesday 24 Nov 2009. Stock is suspended from trading and reopened on Wednesday with the announcement that Mr Lin had sold all his shares to Upbest the unbelievable price of 0.18 each and with regulatory requirements will make a general offer for all outstanding shares at the derisory price of 0.18 each.

Stock opens at 0.45 (from the previous closing of 0.275), peaks at 0.59 and at this time trading at 0.44 giving it a market cap of $245m.

Now this is a company that for the last 5 years averaged over $100m/year in FCF. Why are they continuously raising funds when they have so much cash? Is the cash still there?

Voluntary liquidations. Norstar

Appears that Fu Ji and First Natural aren't the first, but is a start of a trent of net nets going for liquidation and wiping out shareholders. The management seem to escape not just unscathed but with most of the booty.

"

Norstar chairman Lilly Huang convinced the High Court to put the firm into provisional liquidation. Norstar had made a wrong-way bet on accumulators and owed 39 million yuan on that contract. It had also been sued by a supplier for 326 million yuan.

However, according to Webb, the company should have had 753 million yuan of spare cash after these liabilities.

Lai has the same court-appointed role at Norstar. Deloitte is now selling the car-parts firm to state-owned Beijing West, which is connected to Norstar's management.

"

Fu Ji Food (1175) liquidates voluntarily

Has more assets ($3b) than liabilities ($2.2b) but the only ones emerging ahead in this mess will be the managers.

As typical of mainland companies.

Poor management with ulterior motives:

• An official at Fu Ji's headquarters in Shanghai said: "We think the game of financing is too complicated for us. We just want to quit it by liquidation."
• company was short of cash and had lost many middle managers, who had left to set up operations that compete with Fu Ji's businesses.

Bond holders are Fxked as they have no way of recovering a good proportion of assets as the company would have already been stripped. Bonds are trading at a 75% discount which means stock holders will get nothing but an expensive lesson:

Insolvency: who gets what in Hong Kong

1. Employees
2. Lenders with a claim on the company's assets, such as mortgages on properties
3. Unsecured creditors, usually banks and bondholders
4. Shareholders

A real clue to the shenanigans happening was the resignation of a Director who actually said something useful:

"Carlye Tsui Wai-ling, chief executive of the Hong Kong Institute of Directors, resigned as an independent director of Fu Ji last month. In her letter of resignation, she expressed concern that she could not get information from the company in a timely manner, and cited its delay in issuing its annual results last year"

This is a similar situation to First Natural Foods (1076) voluntary liquidation.

First Natural (1076) - The Chairmans alive!

So this bastard Yeung Chung Lung with the retarded son is not only still alive but is contesting ownership of a public company in a court in China. So WTF has been in control of this company since it's suspension and mass resignations in December last year?

Has the CEO of a public listed company defected and is still in control? Who has been writing the cheques? WTF has the liquidators been doing? Has the company assets been stripped?

Why are these questions been asked? How the hell does a chairman maintain control of a company after 'disappearing'?

Another example of the risks in investing in small/medium sized companies in China.

Today's filing

First Natural (1076) thieves update

Yeung Chung Lung, 55 - Chairman, Yang Le, 31 (Son), Ni Chao Peng, 33 (Son in Law). First Natural scambags.

The ongoing saga of the missing chairman (Yeung Chung Lung) underlines how "cash in the bank" for China companies is not really cash in the bank.

The Chairman Mr Yeung and his inbred scumbags brood, having looted the company are on the run... probably in Canada or Thailand.

Updated regulatory announcement:

"According to the information obtained by the PRC lawyers, a sum of approximately HK$84 million had been withdrawn in November 2008 from the Company’s accounts maintained with Xiamen International Bank. Such withdrawal was not recorded in the books and records of the Company and had not been made known to the existing Board."

The bunch of assholes have company property, probably in the way of seals and stamps and are probably still issuing company cheques.

"The Provisional Liquidators have engaged PRC lawyers to commence legal actions in the PRC

against Mr. Yeung and Mr. Yang Le [Father and Son] for the possible damages to the Group resulting from their illegal possessions of the PRC Subsidiaries’ properties, including but not limited to, the company chops and statutory certificates of the PRC Subsidiaries."

From the unaudited interim June report of 2008, they had $792m RMB cash and cash equivalents in the bank. At least $82m HKD has been confirmed as looted. They have $400m RMB in debt (not including AR). This leaves them with ~$300m RMB in cash. With 1.2b shares in circulation, this leaves 0.25cents/share in cash and ~$400m in PPE.

The red flag was the HUGE increase in AR which was $292m ($167m in 2007), this suggests that at least $130m was "transferred" in preparation for the year end disappearing act.

FN last traded at 0.295. If and this is a big IF, just $82m and the $130m in AR was looted, the NAV of the shares will be around 0.40 cents.

The auditors are: CCIF CPA Limited, 20F Sunning Plaza, 10 Hysan Ave, Causeway Bay, HK. From their home page are "CCIF CPA Limited is a medium-sized and well-established accounting firm rooted in Hong Kong." Rest assured the shareholders are first and naturally "rooted" and not only in HK.

First Natural (1076) on the run

(The case of the Chairman in hiding).

Update from provisional liquidators.

18th Feb:

UPDATE ON THE RESIGNED DIRECTORS

As stated in the Announcement, Mr. Yang, Mr. Ni and Mr. Lu (the “Resigned Directors”) tendered

their resignations as the Directors for personal reasons with effect from 12th December 2008. In their

resignation letters, the Resigned Directors only cited personal reasons for their resignations and had not

specified whether they had any disagreements with the Board nor were there any matters that needed

to be brought to the attention of the shareholders of the Company (the “Shareholders”). As such, the

Company was only able to announce their resignations based on the content of their resignation letters.

Since the appointment as Provisional Liquidators of the Company, Messrs. Stephen Liu Yiu Keung and

David Yen Ching Wai of Ernst & Young Transactions Limited (the “Provisional Liquidators”) have been

trying to contact the Resigned Directors but without much success. The Provisional Liquidators did,

eventually, manage to contact Mr. Yang on 6th February 2009. However, Mr. Yang did not elaborate

on the reason of his resignation nor did he indicate if there were any disagreements with the Board and

any matters that needed to be brought to the attention of the Shareholders. Currently, the Provisional

Liquidators are still trying to contact the other two Resigned Directors.

First Natural 1076 thieves

Following thieves wanted dead or alive, preferably the former for the raping of shareholders in First Natural Foods. HK Exchange and the SFC asleep at the wheel.

Yeung Chung Lung
Yang Le
Ni Chiao Peng

Chinese whales in Macau

Study done on the Chinese high rollers in Macau. The same probability impaired ones may have managed First Natural Food (1076).

The whales end up getting harpooned..

"According to a study of 99 high rollers from mainland China whose gambling habits propelled them into the headlines, 44 per cent were either sentenced to death, murdered, committed suicide or were serving long jail sentences after committing crimes to fund their visits. Zeng Zhonglu, a professor at the Macau Polytechnic Institute, found 15 of the gamblers were sentenced to death, seven committed suicide or were "killed by others", two were given a death sentence reprieve and 20 were serving long jail sentences."

The Missing Chairman: First Natural (1076)

First Natural has filed for "automatic liquidation" after the Chairman goes MIA and his brood and son inlaw making up the management team resigns en-mass. This was after unilaterally breaking an interest swap contract ill advisedly entered into with Douche Bank.

Waiting now to see if the RMB$798m (June 2008) worth of cash in the bank still exists.

Doesn't bode well at all, the chairman's probably in Canada sipping green tea infused with 12 year Chivas.

What are our friends at the HKEX or SFC doing about this? Having extra long yumchars and massages at their favourite institutions no doubt.